Analysis Grains
Interest encourages Russian farmers to cash in on grain
Grain traders in the US and Europe are not completely aligned. Despite unimpressive export figures, wheat in Paris seems to have found the temporary low point. Due to rain on the southern prairies of the US, wheat in Chicago was under pressure. Russian farmers are in a hurry to cash in their grains this season. Due to high interest rates, the savings bank is a better alternative than speculating on higher prices.
The December contract for wheat on the Matif closed €1.25 higher at €210.75 per ton yesterday. On the CBoT, wheat took a step back for the fourth day in a row and closed 2% lower at $5.30¼ per bushel. Corn also took a hit, dropping 1.8% to $4.19 per bushel. Soybeans closed 1.8% lower, similar to corn. The November soybean contract closed at $9.85¾ per bushel.
In the wheat market, the search for the bottom continues. In Europe, we seem to have found it temporarily. Despite reports of disappointing French grain exports from FranceAgriMer, the Matif showed some signs of recovery yesterday. According to Strategie Grain, this will not be a season of record exports. Compared to last season, the market bureau expects a sharp decline in exports. European wheat has become slightly more attractive on the global market, but still lags behind wheat from the Black Sea region.
The rain from last week on the southern prairies in the US is clearly visible on the drought monitor. The deep red spots in northern Texas, Oklahoma, and Kansas are shrinking, and according to weather reports, more rain is on the way. Analysts more or less expect the condition of winter wheat to further improve. Drought remains a problem on the northern prairies. However, spring wheat dominates there, and analysts are not yet concerned about negative impacts on potential yields.
According to some experts, Trump's peace plans for the war between Ukraine and Russia also affect the wheat market. We know that Biden supports Ukraine and argues that we should continue to support Ukraine as long as necessary. Trump has a different stance. He wants peace and, perhaps more importantly, does not want to spend buckets of money on foreign wars. An eventual deal will not win any beauty contests. Something like 'Ukraine gets Donbas back, but Russia keeps Crimea and Ukraine cannot become a member of the EU or NATO' is mentioned as a possible outcome of peace negotiations. This could bring peace back to the Black Sea region and make grain exports easier. Whether things will actually go in that direction remains to be seen. The first months of the current export season were good for both Ukraine and Russia, and various analysts openly wonder what will be left for the second half of the season.
Bank brings more profit than storing
According to Reuters, Russian farmers are not hesitating to sell grain. The reason behind this is the very high interest rates in Russia. The Russian Central Bank recently raised the interest rate to 21% to curb inflation and cool down the wartime economy. The official inflation rate stands at 9.8%. The interest on short-term deposits can go up to 25%. It is easier to sell grain immediately and put the money in the bank at more than 20%, according to the director of Ikar. That is also the reason behind Russia's large exports, according to the head of the market bureau. 'This year, there is no reason to hold onto the grain any longer.'
